This post originally appeared on LinkedIn Pulse and was written by William Patel

Leadership is perhaps one of the most important aspects of management. This is because leadership is a major factor which contributes immensely to the general wellbeing & uplifting of organisations. Organisations such as General Electric and Chrysler had been turned around from the brink of bankruptcy to become two of the world’s most profitable organisations through the effective leadership. Great nations like the USA, Britain, France and India are some of the most prominent nations in the world today on the wings of effective leadership. This is because leaders in organisations and nations make things happen. 

Several theories have and are being put forward to explain leadership effectiveness. Two of the most prominent leadership theories are Transformational and Transactional leadership theories. Since the late 1980s, theories of transformational and charismatic leadership have been ascendant. Although most agree that Transactional and transformational leadership are different in concept and in practice, many believe that transformational leadership significantly augments transactional leadership, resulting in higher levels of individual, group, and organizational performance. Others believe that Transactional leadership is a subset of transformational leadership.

Transformational Leadership: A transformational leader is a person who stimulates and inspires (transform) followers to achieve extraordinary outcomes. He/she pays attention to the concern and developmental needs of individual followers; they change followers’ awareness of issues by helping them to look at old problems in a new way ; and they are able to arouse, excite and inspire followers to put out extra effort to achieve group goals. Transformational leadership theory is all about leadership that creates positive change in the followers whereby they take care of each other's interests and act in the interests of the group as a whole. The concept of transformational leadership was introduced by James Macgregor Burns in 1978 in his descriptive research on political leaders, but its usage has spread into organisational psychology and management with further modifications by B.M Bass and J.B Avalio.

Transformational leadership enhances the motivation, morale, and performance of followers through a variety of mechanisms. These include connecting the follower's sense of identity and self to the project and the collective identity of the organization; being a role model for followers that inspires them and makes them interested; challenging followers to take greater ownership for their work, and understanding the strengths and weaknesses of followers, so the leader can align followers with tasks that enhance their performance.

Transactional Leadership: Transactional Leadership, also known as managerial leadership, focuses on the role of supervision, organisation, and group performance; transactional leadership is a style of leadership in which the leader promotes compliance of his followers through both rewards and punishments. Unlike Transformational leadership, leaders using the transactional approach are not looking to change the future, they are looking to merely keep things the same. These leaders pay attention to followers' work in order to find faults and deviations. This type of leadership is effective in crisis and emergency situations, as well as when projects need to be carried out in a specific fashion.

Within the context of Maslow's hierarchy of needs, transactional leadership works at the basic levels of need satisfaction, where transactional leaders focus on the lower levels of the hierarchy. Transactional leaders use an exchange model, with rewards being given for good work or positive outcomes. Conversely, people with this leadership style also can punish poor work or negative outcomes, until the problem is corrected. One way that transactional leadership focuses on lower level needs is by stressing specific task performance. Transactional leaders are effective in getting specific tasks completed by managing each portion individually.

Comparison Between Transformational and Transactional Leadership:

Transactional	VS	Transformational
Leadership is responsive		Leadership is proactive
Works within the organisational culture		Works to change the organisational culture by implementing new ideas
Employees achieve objectives through rewards and punishments set by leader		Employees achieve objectives through higher ideals and moral values
Motivates followers by appealing to their own self interest		Motivates followers by encouraging them to put group interests first
Management-by-exception: maintain the status quo; stress correct actions to improve performance.		Individualised consideration: Each behaviour is directed to each individual to express consideration and support. Intellectual stimulation: Promote creative and innovative ideas to solve problems.

Transformational and Transactional leadership theories represent bold attempts by researchers to explain the nature and effect of leadership. Both theories have their various strengths and weaknesses’ However, the influence of situational variables on leadership outcomes within the context of both styles of leadership.